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Self-storage operators across the nation are enjoying the benefits of high average occupancy at their facilities coupled with continued slow growth in new-property developments, according to an article published by “National Real Estate Investor” (NREI), a publication and website covering the real estate investment market. This combination, along with continued low numbers in home ownership, has helped increase consumer demand for storage units, which generally means operators can increase rental rates without fear of losing business, NREI reported.

The self-storage industry currently has 91 percent occupancy, with rental rates for a typical 10-by-10 unit about $87 per month, according to the NREI report. Rental income was up 4.1 percent year over year during the second quarter, said R. Christian Sonne, executive managing director of the Valuation & Advisory Division of commercial real estate firm Cushman & Wakefield (C&W).

“We used to have, on average, about 1,000 new properties being built a year nationwide; this year there’s only 117,” Sonne said in an interview with NREI. “For self-storage, the two pillars of success are population growth and time, and that’s happened. With little new building and high demand, the owners can raise rents whenever they want—and they are.”

Consumer demand has been spurred in part because the homeownership rate (65.1 percent) remains about 4 percent below where it was 10 years ago, according to Marc Boorstein, principal with MJ Partners Real Estate Services. Fewer homeowners means more renters, which generally translates to an increase in demand for self-storage, he said.

In its second-quarter overview report, MJ Partners said the four publicly traded U.S.-based self-storage real estate investment trusts (REITs)—CubeSmart, Extra Space Storage Inc., Public Storage Inc. and Sovran Self Storage Inc.—grew revenue between 5 and 9 percent. Financial growth for the REITs has grown steadily since the first half of 2010 after declines in the range of negative 6 percent in the second half of 2009, according to C&W’s Self-Storage Performance Quarterly (SSPQ) report, produced four times a year by the company’s Self Storage Industry Group, which tracks industry construction trends, property sales and capitalization rates.

Although independent self-storage owners comprise the majority of industry operations, the REITs and other financially stable multi-facility operators have tried to take advantage of the market in recent months with aggressive growth strategies, including the acquisition of entire facility portfolios when possible. “There’s been about $2 billion in portfolio acquisitions in the past couple of years, including Storage Deluxe’s $560 million East Coast portfolio sale to CubeSmart last year,” Sonne said. “They are trying to find portfolios, but there’s just not that much out there.”

W. P. Carey Inc., a Dallas-based, non-traded REIT, vaulted into the top 10 of the Inside Self-Storage (ISS) Top-Operators List this year by increasing its net rentable square feet from 4.9 million to 8.97 million in 2012, an 83 percent jump. It increased its portfolio from 70 facilities to 167, a 138.6 percent increase.

The industry’s largest operator, Public Storage, acquired 43 storage properties last week from investment management firm Harrison Street Real Estate Capital LLC and operator Morningstar Properties LLC for $315 million. The deal is believed to be the largest self-storage portfolio transaction this year, adding more than 2.9 million square feet across five states to the company’s national footprint.

The industry’s successful financial performance continues to attract interest from a wide range of private investors, Sonne said. “Self-storage had the lowest loan loss of any other sector during and since the recession, and the highest consistent returns,” he said.

C&W’s SSPQ reports are sold in partnership with the ISS Store, an e-commerce website providing on-demand insight and education products for self-storage professionals. Each quarter the SSPQ report contains income and operational performance data from more than 7,000 facilities in the nation's 50 largest Metropolitan Statistical Areas. Details can be found at www.insideselfstoragestore.com.